Everything Is Sizzling at Williams-Sonoma

One of the most enjoyable jobs I've ever had was working for Williams-Sonoma (NYSE: WSM  ) . I imagine that says something about me but it also says something about the company. Williams-Sonoma has a history as a customer friendly retailer and it's done everything it can to turn that ideal into business success. After the market crash, though, things got tough. Williams-Sonoma thrives on two economic conditions.

First, people have to be willing to part with their cash for things that they don't, strictly speaking, need -- a $160 copper tea kettle, for instance. Second, things go better for Williams-Sonoma when people are buying houses and filling them up with new stuff. Those conditions are finally rolling back, and Williams-Sonoma is poised to take advantage.

Williams-Sonoma's first quarter
Williams-Sonoma's five main brands all put up excellent comparable store growth this quarter. The laggard of the group, Williams-Sonoma, was hovering in the low single digits through the end of fiscal 2013 when it rose just 1.5% over the year . In the first quarter of 2014, though, Williams-Sonoma managed a 6% increase in comparable sales . While that was still the lowest increase among the company's brands, it's a big step in the right direction.

The biggest gains came from West Elm, the company's furniture concept, which increased its comparable sales by 18.8% over the same period a year ago . Overall, the company increased comparable sales by 10%.

Williams-Sonoma has always thrived on direct sales, historically relying on catalogues for much of its revenue. In the last quarter, the company demonstrated its strength in direct revenue generation, hitting the 50% mark for total sales from direct channels .

Facing down the competition
Success doesn't exist in a vacuum. Williams-Sonoma is up against plenty of competition, and the stiffest is coming from Restoration Hardware (NYSE: RH  ) , which butts heads with three of Williams-Sonoma's brands -- Pottery Barn, West Elm, and Williams-Sonoma Home. Restoration should announce its first quarter results in the next few weeks, and a comparable sales increase less than 20% would be bad news, where 'bad' is an incredibly relative term.

In its last fiscal year, Restoration Hardware managed a 31% increase in comparable store sales, with a 24% increase in its fourth quarter . Restoration Hardware has the benefit of a networkwide store refresh program that's been going on recently. That's lead to drastic increases in sales from formerly frumpy locations .

Against that sort of backdrop, Williams-Sonoma's performance doesn't seem so stellar. But investors should remember that Williams-Sonoma is a more mature company in many ways. With almost 600 locations across its brands, Williams-Sonoma's footprint is massively larger than Restoration Hardware's. Investors looking at Williams-Sonoma are looking for stability and a modest dividend at a reasonable price. For those investors, Williams-Sonoma is looking very good, indeed.

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